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Credit and Your Family
         
         Credit Cues for College Students
               

Hopefully by the time your child is in college you’ve already had the credit talk with them.  This is a crucial time for them to be financially aware of how credit works because they will most likely be among the roughly 66% of students who graduate with debt in one form or the other.

For the last ten years the cost of college has been steadily going up as well as the necessity of obtaining a degree for your future career.  This is led to more and more students seeking financial aid to assist with paying for college.  As a result not only are more students taking on debt but the average debt that an undergraduate graduates with has climbed approximately 50%. 

The average amount of undergraduate student loan debt was $14,379 at the end of 2006, up nearly $2,000 dollars since 2001.  Also they have an average of $5,781 in revolving credit card debt which is usually at a much higher interest rate than student loans.  This is a harrowing situation for anyone to be in, let alone someone just starting out their careers.

But with proper planning and information your college student can make the right choices for beginning their credit use.  In addition to the strategies used for teens, parents also have a number of ways to help their college student build good credit that won’t weigh them down after college.

One very important resource is the college financial aid office and financial advisor.  They will have up to date information on all of the financial aid choices available to your child as well as how to obtain them.  This way you and your child can compare the costs of different types of financial aid which varies greatly.  It’s a perfect opportunity for your college student to see how different forms of credit work and which ones work best for them.

Starting a new life and in new place usually means buying a lot of new stuff.  Many students fall into the trap of using their shiny new credit cards for purchases other than school and necessities.  In order to curb this possibility you can help your child open up a student credit card.  These credit cards are geared specifically towards meeting the needs to college students. 

Many offer low or no introductory interest rates, rewards for good grades and paying bills on time, as well as additional rewards for purchases at bookstores ect.  However, these cards will work non-school related purchases too.  This means the student credit card needs to have a low limit and you need to keep track of your child’s spending.  The best way to do so would be to co-sign with your child so that you have access to the account if you need to intervene.  

As with your teens, you need to help your college student form a monthly budget.  This simple process is key to keeping spending under control.  It’s hard for young people who haven’t had to deal with the repercussions of poor credit decisions to put their needs ahead of their wants.  With your help they can lay out plans for both the present and the future.  Putting it in front of them on paper will make money issues more of a reality for the student. 

It’s also important to make clear how certain portions of the budget will be paid.  This will assist on keeping track of where the money is being spent and ensure bills will in fact get paid.  During the budgeting phase put as many bills as you can on an automatic pay system.  This way your college student’s busy schedule won’t keep them from forgetting about the monthly bills and hurt their credit score.

There are a number of online resources now for budget worksheets and guidelines to help you and your child come up with a plan that they can actually follow and stick to.

Your children don’t learn money management and credit use in high school or even college, they learn on their own or from you.  So do your child a great service and discuss responsible credit use with them early so they’ll have the advantage later on.

Credit and Kids

Credit and Teens

Credit and College Students